Last week’s revelations by ProPublica that many of the richest Americans are paying little or no income taxes has galvanized Republican opposition to the proposal that additional records be reported by financial institutions to the Internal Revenue Service.
Democrats, on the other hand, are citing the leaked information to ProPublica as evidence that the so-called “Tax Gap” must be closed.
In its FY22 budget, the Biden Administration proposed requiring financial institutions to report data to the IRS from accounts that have “gross flow thresholds” over $600. Republicans oppose that plan and are citing the recent leak as evidence that the IRS has problems handling sensitive information.
“This most recent publication of taxpayer data is especially concerning in light of the Administration’s proposal to provide the IRS with a massive amount of unprecedented mandatory funding aimed partly at mandating collection of additional private and personal information from everyday Americans through financial institutions, including detailed information about their checking and savings accounts,” Republicans on the Senate Finance Committee wrote last week in a letter to George Russell, the inspector general for tax administration at the IRS.
Finance Committee ranking Republican Mike Crapo of Idaho and House Ways and Means Committee ranking Republican Kevin Brady of Texas also said the leaked information demonstrates that the IRS should not be trusted with such data. They also referred to the leak of some of former President Trump’s tax records.
“If this can happen to the wealthiest Americans or even the President of the United States, it could happen to any American taxpayer,” they wrote in a letter to IRS Commissioner Charles Rettig.
Credit union and banking trade groups also are opposed to the Biden plan, saying it would create a huge regulatory burden for financial institutions.
Democrats said last week that while they too are alarmed by the leak, they also are disturbed by the data itself.
“The disclosure this week that some of the wealthiest Americans pay barely any tax was shocking but also not surprising,” House Ways and Means Oversight Subcommittee Chairman Frank Pascrell, D-N.J., said at a hearing on the tax gap. “The revelations should give us greater urgency to address fairness in our tax laws.”
ProPublica said last week it had received a cache of tax information about many of the richest Americans. That data showed, for instance, that Amazon owner Jeff Bezos paid no federal income taxes in 2007. In 2018 Tesla owner Elon Musk also paid no federal income tax. The news organization said it did not know who leaked the confidential tax information.
The IRS inspector general, and the Treasury Department inspector general are investigating the leak; the case also has been referred to the FBI